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Changes to the proposed Carbon Pollution Reduction Scheme

The Federal Government yesterday announced a range of changes to its proposed Carbon Pollution Reduction Scheme (CPRS).

The key announcement was the delayed introduction of the CPRS.  The Government announced a new commencement date of 1 July 2011, which it said was to allow the economy time to recover from the impact of the Global Financial Crisis.

Liable entities will now be required to meet their emissions liabilities from 2011-12, with carbon pollution permits being surrendered for the first time in December 2012.

Other key changes announced by the Government are as follows:

  • A one year fixed price phase will apply between 1 July 2011 and 30 June 2012. 
  • During the fixed price phase, each carbon pollution permit will cost $10 per tonne of carbon emitted and an unlimited number of permits will be available.
  • Fixed price permits from the first year will not be able to be banked for use in later periods.
  • From 1 July 2012, businesses covered by the CPRS will need to purchase carbon pollution permits at the prevailing market rate.  That is, full trading will commence in 2012-13.
  • Auctions for permits for 2012-13 and onwards will commence in 2010-11.
  • A price cap will apply from the commencement of the CPRS.  The price cap will be in place for 4 years from 2012-13, rising at 5% in real terms (calculated using CPI).
  • An additional global recession buffer will be provided for emissions intensive trade exposed industries for the first 5 years of the CPRS.
  • To encourage carbon pollution reductions before the CPRS starts, reforestation will be eligible to voluntarily generate permits for carbon stored from 1 July 2010.
  • The Government is seeking to pass the CPRS legislation through Parliament in mid-2009 to give business certainty moving forward.  Assuming it is able to do so, the Government will outline the carbon caps until 2014-15 in 2010.
  • The Government has allocated up to $200 million to the Climate Change Action Fund in 2009-10.  The $200 million tranche will include up to $100 million for early action energy efficiency strategies for business, including energy audits and capital investment and $80 million for capital investment grants for businesses and community organisations.

While the passage of the legislation is uncertain at this stage, the Government has committed to reduce Australia’s carbon pollution to 25% below 2000 levels by 2020 if the world agrees to an ambitious global deal at Copenhagen in December.  If there is global agreement to stabilise levels of greenhouse gases in the atmosphere to 450 parts per million carbon dioxide equivalent or lower by mid century then Australia will increase its target. 

The Government has indicated that Australia would meet the 25% target by harnessing the CPRS, by putting in place an expanded Renewable Energy Target and by substantial investment in clean energy such as carbon capture and storage. 

Up to 5% of the target could also be met by purchasing international credits, such as avoided deforestation credits, using CPRS revenue no earlier than 2015.

Please contact Lynne Grant or Geoff Green on 03 8319 1866 or at or for further information.

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